As Reform Improves The Overall Market, Inefficient Insurers Could Take Hits

When Assurant Health, a Milwaukee-based health insurance company, announced this month it was laying off 130 employees in Milwaukee and Minneapolis, it blamed the health care overhaul for its struggles — and at least one prominent critic of reform quickly chimed in. “There are more and more Obamacare job-killing stories piling up like this one,” conservative columnist Michelle Malkin wrote in an item with the headline, “The White House War on Jobs.”

I know a lot of smart, thoughtful health reform critics. Malkin is not one of them. But we will likely read more news stories like these in the coming months. And, given public ambivalence about health reform and anger over the economy, we’ll likely hear more naysayers making these arguments. Some of them may even be respectable.

Will they be right? Remember that companies lay off workers all the time. They also hire new ones. And while too many American companies are downsizing or shuttering these days, health care is one of the few sectors that hasn’t stopped creating jobs — and isn’t likely to anytime soon, according to every forecast I know. If I wanted to cherry-pick stories for a clever-sounding column, I could just as easily talk about Dell, which is going gangbusters over the suddenly huge demand for medical information technology.

Of course, a perpetually growing health sector means we’re shoveling more and more money into medical care. The whole point of our conversation about health care reform over the last few years, and the very explicit goal of enacting the new health law, was to find ways of curbing and diverting that growth. We want to spend just a little less, so that we have more money for other purposes. And we want to spend just a little differently, so that we’re getting a higher quality, more humane health care system.

That brings us to the insurer whose downsizing caught Malkin’s attention. The carrier is Assurant, which specializes in selling policies in the individual and small business markets. This niche is the most famously dysfunctional part of our health insurance system — the place you find carriers that aggressively avoid people at risk of getting sick and, frequently, sell policies that leave unsuspecting people exposed to huge medical costs. These carriers are also notoriously inefficient, on the whole, because they sell primarily through brokers, who take a hefty cut, and because they lack the economies of scale that large carriers have.

The health law forces insurers to cover basic benefits. It restricts their ability to mistreat consumers. And it limits the money they can spend on administrative overhead or broker commissions. Once fully implemented, reform will also prevent these carriers from avoiding people with pre-existing conditions. Make no mistake: These are all good things. They mean insurance is becoming more accessible, more comprehensive and more efficient.

Alas, that may also be bad news for Assurant. If the company’s name sounds familiar, that’s because it was in the news early this year when a Colorado jury slapped it with a $37 million judgment for wrongly refusing to pay the bills of a woman in a car accident. (The company claimed the woman had hidden evidence of a pre-existing condition. The jury, obviously, disagreed.) And when the layoffs were announced, an article from the Milwaukee Journal-Sentinel noted that reform would “undercut one of Assurant’s strengths — determining which customers are the best risks.” I have no idea whether Assurant can find other ways to survive as a business. But, if it can’t, then we’re better off relying on competitors that can.

To be clear, sometimes reform really will reshuffle the health care economy in ways that make it worse. And it’s never good news when somebody loses a job. But the solution isn’t to try to freeze every company’s labor force and prevent every single job loss in the health care sector. It’s to promote a more efficient economy, while making sure the unemployed have jobless benefits, training for new work and actual jobs they can take. I support all of those things. Given her obvious concern for the plight of newly unemployed workers, I’m sure Malkin does, too.